Detroit Gave Unions Keys To The City, And Now Nothing Is Left

Kyle Smith
, ContributorI write about economics, politics, media, business and film.Opinions expressed by Forbes Contributors are their own.

(Photo credit: Bernt Rostad)

We keep hearing that the car industry in Detroit is “on the rebound” or that “Detroit is back.” In fact, the city itself is on its back, and it’s bounding toward bankruptcy or a state takeover. How did one of America’s most storied cities land in this predicament? While the city population has shrunk (from a peak population of 1.8 million in 1950 to 714,000 in the last census), it has hardly reduced the government that serves it. All you really need to know about Detroit, which is facing a $327 million budget gap, is that last year it was discovered to still be paying for a “horseshoer” (or farrier) on the Detroit Water & Sewer Department (DWSD) payroll. This individual costs some $56,000 in pay and benefits, despite the city not having any horses to shoe in his department.

Union bosses insisted the DWSD (average compensation: $86,000) needs more, not fewer, such unionized employees, a view associated with a broad spectrum of thinkers from Jimmy Hoffa to the Keynesians running the United States. The DWSD has more than twice as many employees per gallon of water pumped as that other paragon of Midwestern governance, Chicago. An independent report said four out of five employees in the bloated department were redundant and discovered a thicket of union regulations driving up costs. Plumbers complained that, due to union work rules, they had to wait to fix pipes until duly authorized “operators” came along first to shut them off.

The Detroit Federation of Teachers, which enjoys rich pay packages (corrected for purchasing power, Michigan teachers are the best paid in the nation, reported the Mackinac Center for Policy Policy), would do the UAW proud. Its employees pay only ten percent of the cost of their insurance premiums. While they take extravagant numbers of sick days or personal days -- 8 per teacher -- they also cash in on “unused sick days” to the tune of $14.5 million a year. What other industries are so surprised when you aren’t sick that they pay you a bonus? Then again, we’re talking about a group that paid people to quit -- $4.1. million in “termination bonuses” were handed out to teachers’ union members in 2010-2011. And last December the city inexplicably sent out archaic “longevity bonuses” ranging from $150 to $750 depending on years of service for non-union municipal employees, even though the benefit was removed for unionized employees in 2009.

The Detroit Service Employees’ International Union did even better, soaking individuals for its own purposes. It arranged to corral thousands of people receiving Medicaid payments to care for sick friends or relatives into its union, for the purpose of charging these people dues, which it siphons directly from the Medicaid checks. So far SEIU has raked in $34 million this way.

From 2008 to 2011, health insurance costs for Detroit employees and retirees have jumped 62% to $186 million a year, the Detroit Free Press reported. Pension contributions in that period jumped 140 percent, from $50 million to $120 million.

To fight for their lavish compensation, unions have proven prepared to fight back with any weapon at hand. Appointing emergency financial managers is “just like being in the slave days,” complained Iris Salters, the president of the Michigan Education Association.

Michigan Gov. Rick Snyder has 30 days to decide whether to appoint a city emergency manager to try to save Detroit from the catastrophe presided over by elected officials. Such a fixer would have the power to break Detroit’s union contracts and fire political figures. Snyder means business: He’s already interviewed candidates.

Eminem famously said, in a Super Bowl commercial, “This is the motor city, and this is what we do.”

What Detroit does is give unions the keys to the treasury until nothing is left. That day has come, and their own success is killing unions. What can save Detroit? Nothing, probably, though a group of waggish libertarians proposed buying the Detroit river’s dilapidated park Belle Isle for $1 billion (goodbye, budget deficit! For a couple of years, at least) and turning it into a lightly-regulated capitalist wonderland: Macau of Michigan. The New York Times predictably mocked the scheme (because, obviously, Hong Kong and Singapore are doing so badly) but what other plan could make Detroit safe for capitalism again? Detroit is already a union wasteland. It could hardly do any worse if it became home to Galt’s Gulch.